Paragon Bank has called on the government to reconsider its proposed timetable for mandatory energy efficiency improvements in the private rented sector (PRS), warning that the current plans risk exacerbating the rental supply crisis and driving landlords out of the market.
Responding to the Department for Energy Security and Net Zero’s consultation on improving the energy performance of privately rented homes, the lender has recommended a phased approach to implementing a minimum Energy Performance Certificate (EPC) rating of C, rather than the blanket deadlines currently under consideration.
STAGGER CHANGES
The government has proposed that all new rental tenancies meet EPC C by 2028, extending to all tenancies by 2030. Paragon is instead urging ministers to stagger the changes: requiring EPC C for new tenancies from 2030, extended tenancies by 2033, and all remaining tenancies by 2035.
Paragon warned that the current timetable fails to take account of significant barriers to delivery, including limited retrofit capacity, labour shortages and the broader housing agenda, which includes the target of building 1.5 million new homes during this parliament.
According to government data, around 60% of PRS properties in England and Wales currently fall below EPC C. Meeting the 2030 deadline would require retrofitting 1.6 million homes each year – equating to approximately 2,000 properties a day. If the 2028 date were enforced for new tenancies, that figure would rise to 4,000 daily.
REALISM NEEDED
Louisa Sedgwick, Paragon Bank’s managing director of mortgages, said the bank supported the UK’s Net Zero ambitions but stressed that a more realistic implementation schedule was essential to avoid harming tenants and undermining market stability.
“We support the Government’s Net Zero target and understand the need for strengthening policy and regulation to drive climate action, but we would strongly urge that a longer term and more balanced approach is taken to allow the retrofit supply chain to grow,” she said.
“Increasing the delivery timeline and maintaining flexible exemptions allows for a smoother transition to EPC A-C in the PRS, without exacerbating the demand and supply imbalance, which is already expected to grow due to forecast population growth and demographic changes.”
INVESTMENT CAPS
In its consultation response, Paragon also recommends reverting to the original proposal of a £10,000 investment cap and seven-year exemption period for non-compliant properties. It has called for targeted financial support, including schemes such as a Warm Homes Grant, to help landlords fund improvements.
The bank further argues that EPC reform should be synchronised with wider changes to the Energy Performance of Buildings regime and underpinned by a dedicated skills and training programme to tackle shortages in retrofit and construction trades.
Paragon has also highlighted regional disparities in housing stock, with energy-inefficient properties more concentrated in the North and Midlands. It warned that landlords in these regions could face disproportionate financial pressures as a result of the planned legislation.
“Rushed legislation could cause significant disruption.”
Research commissioned by the bank from Pegasus Insights found only 17% of landlords consider 2030 a reasonable deadline for undertaking EPC works. At the same time, demand for rental homes remains buoyant, with 73% of landlords reporting strong tenant interest. Data from Zoopla indicates tenant demand is now 79% higher than before the pandemic, while available rental stock is 22% lower.
Sedgwick concluded: “Rushed legislation could cause significant disruption to a PRS that will already be adapting to the new Renter’s Right Bill, forcing some landlords to sell because they cannot complete works in time. Adopting a more considered and realistic timeframe will give landlords more capacity to adapt their properties, allow the retrofit supply chain and labour force to grow and, ultimately, will be more beneficial for tenants.”
